What is Georgie Porgie doing about this?......Venture capital shrank 61% in 2nd quarter
BY MATT MARSHALL
Mercury News
Venture capital just keeps vanishing, especially from Silicon Valley.
Venture capitalists invested $10.6 billion in start-ups nationwide during the second quarter, a 61 percent drop from the same time last year, according to a report released Thursday by Venture Economics, a VC research firm.
In the the greater Bay Area, however, VCs invested only $3.14 million, or 66 percent less than the $9.28 billion invested during the same quarter a year ago.
``Things are getting slower and slower,'' says Kelly Tindall, director of research at Venture Economics. ``Even on a daily or weekly basis, you're just seeing less deals happening.'' She said that California is seeing a bigger slowdown because there was more deal-flow to begin with.
True, venture capital funding is still relatively high compared to early 1999 levels. The drop over the last year follows the bursting of the Internet bubble and accompanying crash of the stock market.
Many venture capitalists hope that funding levels will recover by next year. For the meantime, however, a majority of them say they are proceeding cautiously, still assessing how badly the information technology sector has been hit. Until they see the bottom, they are unlikely to launch aggressive rounds of new fundings.
Alan Austin, a partner at Accel Partners of Palo Alto, says the summer months are usually slow, and it will be no surprise if third-quarter funding declines. But aside from that, Austin believes the tech sector, especially communications, is still working through excess inventories and other fallout.
``I haven't seen anything that indicates that we've worked through this,'' he said. ``When you hear people saying we've hit the bottom, that's a guarantee that we haven't. When you've hit the bottom, people are in despair. They're saying, maybe there won't be any more venture capital, maybe there won't be any more information technology.''
The biggest recipients of funding during the quarter were 3PARdata of Fremont, which builds high-end storage servers, and Perlegen Sciences, a Santa Clara biotech company. Both received $100 million.
They also reflect changes in the sort of companies that are getting funding. Internet infrastructure companies are attracting the most venture funding, even as companies in other Internet sectors, like e-commerce, are seeing funding dry up. Storage technology has been hot recently.
Meanwhile, funding for health-care companies, including biotechnology firms, rose to $1.47 billion, a 37 percent increase from the $1.07 billion invested a year ago. Of total dollars invested, health-care soaked up 13.8 percent, up from 11.2 percent during the first quarter of 2001 and only 3.95 percent in the second quarter of 2000.
On Monday, Prospect Venture Partners, a Palo Alto venture firm, announced a $500 million health-care fund, one of the largest health-care VC funds to date. The news underscores the confidence that investors have in the sector, coming as it does at a time when the financing environment is generally difficult.
In other news, Insevo, a provider of e-business infrastructure, announced it has raised $3 million, including $2 million from 3i, a London-based venture firm. In other recent funding news, Metro-Optix, an optical firm with offices in Santa Clara said it has raised $50 million, Tacit Knowledge Systems, a Palo Alto e-mail software firm, announced $10 million in financing, and Milpitas' Velio said it has raised $45 million..........HE'S TOO BUSY WATCHING THE BOX SCORES OF THE TEXAS RANGERS! |
